Barratt Developments, one of the UK’s largest housebuilders, reported a mixed performance for the financial year 2024, reflecting the ongoing challenges in the housing market caused by high interest rates and the cost-of-living crisis.
Indeed, the word ‘challenging’ was used twice in the company’s outlook. Investors will hope the new Labour government acts quickly to improve conditions for builders.
The company saw a slight improvement in its net private reservation rate, which rose to 0.58 per active outlet per week, up from 0.55 in the previous year. This 5.5% increase was partly bolstered by sales to the private rental sector and registered providers of social housing.
However, total home completions fell significantly to 14,004, an 18.6% decrease from the 17,206 reported in FY23. The decline was more pronounced in the first half of the year, with a 28.5% drop, while the second half saw a more modest 8.7% reduction.
The average selling price also saw a downturn, with the total ASP falling to approximately £307,000, compared to £319,600 in the previous year. The private ASP experienced a more substantial decrease of 6.4%, dropping to about £344,000.
Despite these challenges, Barratt’s forward sales position remained relatively stable. As of 30 June 2024, the company reported total forward sales of £1,912.3 million, representing 7,239 homes. This is down from £2,223.4 million and 8,995 homes at the same point last year.
Looking ahead, Barratt anticipates a further reduction in completions for FY25, projecting between 13,000 to 13,500 homes. The company attributes this to lower land buying activity in recent years and a forecasted 9% reduction in average sales outlets for the coming year.
Barratt’s problems were summed up by its CEO’s comments, who chose to focus on build quality and the balance sheet amid a slowdown in completions, which will concern some investors.
“Whilst we continue to navigate a challenging macroeconomic backdrop, we are delivering industry leading build quality, sustainability and customer service. Combined with the strength of our balance sheet, this has ensured we remain resilient and responsive through the cycle,” said David Thomas, Chief Executive.